The focus of finance activities is on

Choose one answer.

A. Accumulating data for internal use.
B. Reporting financial data for external use.
Incorrect. The focus of finance activities is on obtaining and managing an organization's
capital.
C. Determining an organization's tax structure.
D. Obtaining and managing an organization's capital.
ID: 5854808
| Points: 1
Question 2.

The market value of an organizations stockholder shares is likely to be substantially

different from the organizations book value. The organizations market value to
shareholders is based on
Choose one answer.
A. Accounting income.
B. GAAP accounting rules.
C. Economic income.
Correct. It is based on economic income.
D. SAP accounting rules.
ID: 5844558
| Points: 1
Question 3.

Sean owns a retail mens clothing store. After a recent fire, the insurance adjuster requested
copies of the stores most recent financial statements. The adjuster is most likely to use the
statements to
Choose one answer.
A. Classify the inventory loss as covered or denied.
B. Evaluate the marketability of the inventory.

C. Estimate the inventory on hand at the date of loss.

Correct. The adjuster is most likely to use the statements to estimate the inventory on hand
at the date of loss.
D. Forecast the stores immediate cash needs.
ID: 5845985
| Points: 1
Question 4.

The measurement of the economic income of an organization differs from the measurement
of the organizations accounting income. Which one of the following would be true regarding
this difference?
Choose one answer.
A. Economic income recognizes expenses evenly over the period rather than when incurred.
Incorrect. Economic income is based on fair market value rather than historical value.
B. Economic income is based on fair market value rather than historical value.
C. Economic income depends on income measurement rules rather than accounting principles.
D. Economic income is the net value of the goods and services rather than the change in net worth.
ID: 5844557
| Points: 1
Question 5.

In addition to complying with laws and regulations, a corporate code of ethics provides
Choose one answer.
A. Financial transparency to management.
B. Maximization of shareholder wealth.
C. The establishment of corporate goals.
D. A means of managing ethics in the workplace.
Correct. It provides a means of managing ethics in the workplace.
ID: 5843902
| Points: 1
Question 6.

Current assets include

Choose one answer.

A. Inventory.
Correct. Current assets include inventory, accounts receivable, and marketable securities.
Noncurrent assets include land, buildings, equipment, leaseholds, patents, copyrights, and
trademarks.
B. Equipment.
C. Leaseholds.
D. Patents.
ID: 5844782
| Points: 1
Question 7.

Which one of the following best explains how unrealized capital gains have a significant
effect on a companys business operations?
Choose one answer.
A. Unrealized capital gains are offset by increases in interest rates on debt obligations.
B. All debt obligations have a significant effect on the companys operating cash flows.
C. It is assumed that the gains will eventually be realized and are included in income.
D. They are part of the companys economic income and affect the companys net worth.
Correct. Unrealized capital gains are part of the company's economic income and affect the
company's net worth.
ID: 5844573
| Points: 1
Question 8.

Insurers count premiums as revenue when the premiums are

Choose one answer.
A. Written.
Incorrect. Insurers count premiums as revenue when the premiums are earned, not when
they are written or received. Therefore, insurer revenues are known as "premiums earned."
B. Earned.
C. Recorded.

D. Received.
ID: 5844825
| Points: 1
Question 9.

The GAAP matching principle

Choose one answer.
A. Requires businesses to match accounts due with accounts receivable.
Incorrect. By requiring businesses to match expenses to revenues, the matching principle
helps businesses to accurately measure the profitability of their activities.
B. Helps businesses to accurately measure the profitability of their activities.
C. Allows businesses to compare the income statement and balance sheet.
D. Helps businesses compare profitability of non-identical enterprises.
ID: 5858794
| Points: 1
Question 10.

Why is it so important for a corporation to adopted a code of ethics?

Choose one answer.
A. A code of ethics allows corporate decisions to be reported on favorably by the news media.
B. A code of ethics provides a means of actively managing ethics in the workplace.
Correct. A code of ethics provides a means of actively managing ethics in the workplace.
C. A code of ethics ensures compliance with laws and regulations.
D. A code of ethics clarifies what is ethical to employees.
ID: 5861147
| Points: 1
Question 11.
The Sarbanes-Oxley Act of 2002
Choose one answer.
A. Requires principal officers to guarantee completeness and accuracy of financial reports.
Incorrect. The Sarbanes-Oxley Act of 2002 created a board to regulate public accounting
firms that audit publicly traded corporation.

B. Enhanced financial disclosure requirements for all corporations issuing stocks.

C. Subjects officers to civil penalties for failing to fulfill requirements.
D. Created a board to regulate public accounting firms that audit publicly traded corporation.
ID: 5854796
| Points: 1
Question 12.

Ramirez Pools, a small swimming pool contractor, has submitted an application for
insurance to Golden Boar Insurance Company. Attached to the application are current
financial statements for Ramirez Pools. The Golden Boar underwriter might analyze the
financial statements to help her to assess the applicant's
Choose one answer.
A. Credit rating.
B. Market value.
C. Business plan.
D. Financial stability.
Correct. The Golden Boar underwriter might analyze the financial statements to help her to
assess the applicant's financial stability.
ID: 5848222
| Points: 1
Question 13.

A firm records revenues and expenses as they are incurred. This is called
Choose one answer.
A. Cash basis accounting.
B. Accrual basis accounting.
Correct. This is called accrual basis accounting.
C. Going concern accounting.
D. Tax basis accounting.
ID: 5858796
| Points: 1

Question 14.

Accounting activities include

Choose one answer.
A. Accumulating and reporting financial data.
Correct. Accounting activities include accumulating and reporting financial data.
B. Managing an organization's capital
C. Providing access to financial markets.
D. Managing an organization's intangible assets.
ID: 5854809
| Points: 1
Question 15.

How would an underwriter best use a potential insureds financial statements when
underwriting the risk?
Choose one answer.
A. To determine how much actual premium the risk can pay.
B. To determine if there is any potential growth for this risk.
Incorrect. To assess the ability of the risk to make timely premium payments.
C. To determine if the risk is committing any fraud in their operations.
D. To assess the ability of the risk to make timely premium payments.
ID: 5843949
| Points: 1